Many businesses recognize that their most important asset for success is their employee base. Unfortunately, one crucial step in managing and strengthening that asset is often overlooked. In the face of constant competitive pressures, companies often do not utilize completely the employee performance review process.

Moreover, small businesses face an increasing number of lawsuits initiated by former employees. Each employee management decision (including termination) requires sound judgment and practices to prevent exposure to significant and costly legal risks. An employee's past performance evaluations (especially documented in writing) easily represent one of the employer's best defense and a valuable tool to help improve employee communication, morale, motivation, and productivity.

Employee performance reviews reflect much more than counseling exercises. They are part of a bigger, more strategic picture. Consider the following seven factors to help improve employee performance:

1. Implement a consistent and regular Performance Evaluation System.

Performance evaluations need to be applied fairly and consistently to assess how well employees achieve their goals. A good performance appraisal system can provide a very solid foundation for decisions on promotions, development, and terminations.

Schedule on a regular basis a review of each employee’s job performance. Provide more frequent evaluations of newly-hired or transferred employees as well those with individual development plans. While the timing of evaluations can depend on the nature of the jobs, business operations, and types of goals, a regular schedule needs to be in place.

As employees develop and shift positions within the company, two other best practices (which very few do well) help keep the evaluation process seamless:

• Before the employee transitions to another job position, the former manager should complete an evaluation.
• Prior to a manager or supervisor transferring to another job, he or she should complete an evaluation for each staff member.

2. Download and customize performance evaluation forms to provide written records for both your own and your employees' use.

You can easily download performance evaluation templates from the HR Support Center to get started. Having an accurate and detailed job description also helps towards customizing a performance evaluation form. Ideally, the appraisal form includes specific references to each function of the employee’s job as well as the ability to rate and comment on the observed performance.

Furthermore, the evaluation should reflect the relative priorities and importance of the skills and responsibilities involved. For example, which function has more importance for a Sr. Accountant – general ledger account analysis or presentation skills? Consider how much value or weight a certain job function may have over another in determining overall performance.

3. Show employees the link between their individual performance and company performance and goals.

Evaluating one's performance should directly relate to a current and relevant set of team-based, departmental, and organizational goals. If it does not, then the evaluation form and / or the respective job description needs to be updated. Be sure to inform the affected employees accordingly.

In addition, you can gather individual performance information to assess how a particular team has been performing and then how to remedy any deficiencies. You may find a certain team lagging in responsiveness and productivity simply because it was inadvertently not included on a critical email distribution list.

4. Understand how legal HR issues play a part in performance review meetings.

When facing a potential problem with an employee's performance, know your legal HR responsibilities. How you handle a performance issue could be the difference between an individual’s success and the business getting slammed with a discrimination or wrongful termination lawsuit. For example, if you have concerns about a receptionist’s rapidly declining typing skills, it could be attributed to a potential disability for which you may need to provide reasonable accommodations under the federal American with Disabilities Act (ADA).

Following your company’s written HR policies appropriately is another key strategy. What does your Employee Handbook state about the performance evaluation process? How does it address individual development plans or disciplinary actions regarding poor employee performance? How does it address the employee’s ability to appeal his or her performance appraisal to a higher management level?

5. Directly address employee issues.

Sometimes perfectly valid reasons may lead to an employee's poor performance. For instance, an employee’s lack of focus may be due to a family member being ill and requiring extra care. Engage in open and direct communications with employees regularly and often so that you can understand changes in performance. Managers naturally are difficult approach. By being proactive you can remove this barrier and help employees work through their work-related concerns. By the time the “formal” performance review meeting arrives, few if any surprises should exist.

6. Empower the employee to improve.

If the employee wants to improve, then ask him or her to create an action plan. Although it remains important to provide assistance when needed, the best action plans are those created by the employee. So, give him or her full ownership. In addition, you can help find or create resources to support the employee’s plan. For instance, there may be a local training session that can help an employee gain needed skills or experience.

If the employee denies a problem exists or becomes noticeably aggravated, then ask the person to take some time (even time off from work, if necessary) to figure out the next step. This gesture communicates that the performance issue is serious. If the employee appears genuine and enthusiastic but needs extra training and guidance, then you have at least something to work with.

7. Follow-up, follow-up, and follow-up.

Monitoring and measuring your employees regularly is crucial. If you and the employee have agreed upon steps the employee will take to improve his or her performance, it is critical that you follow-up on those commitments. This can be done informally or formally. Either way, you send the employee a message that the expectations are being taken seriously and that you are investing in the employee’s professional growth. Also, if an employee performs exceptionally well, makes a significant improvement or adds an unexpected contribution, be sure to recognize and reward accordingly. Doing so will go a long way towards paving long-term efforts to improve.

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By implementing an effective performance evaluation process, your business can achieve a number of positives, including better employee productivity, performance, relations and communication. With a sound evaluation process in place, your employees will know what is expected of them, how to achieve certain goals, and why they will make a real difference to the future of the business.